Warning for homeowners going into 2025

Interest rates may be dropping, but South African homeowners and buyers must remain cautious going into 2025.

Tyson Properties CEO Chris Tyson welcomed the second straight interest rate by the South African Reserve Bank (SARB), taking the repo rate to 7.75%.

However, he stressed that homeowners must remain cautious going into 2025.

Although Tyson and most of the nation’s economists expect the Reserve Bank’s Monetary Policy Committee (MPC) to cut rates by at least 50 basis points in 2025, he believes consumers must learn from past mistakes by decreasing their debt.

He also recommends that customers either save the difference or continue to repay the same amount on their home loans to rapidly reduce what is likely their largest monthly expenditure. 

“Rather than your repayments being predominantly interest with a small amount credited to the capital borrowed, homeowners can increase that balance and score by paying off their bond in a shorter timeframe,” said Tyson.

“The benefit of this saving is that it cannot attract tax as it is simply a future cost reduction and not income.”

Based on the fact that most South Africans have been paying 11.5% on their bonds before the SARB lowered the repo rate, the latest reduction takes R171 off home loans worth R1 million and R344 off R2 million bonds.

Although these are small amounts, they will add up to more meaningful figures next year.

“We have been given a good indication by the South African Reserve Bank that the interest rates we have seen over the past two years are the ceiling,” said Tyson.

“Always budget around the maximum interest rate and not the current interest rate. That way, if it comes down, and you do not decide to continue paying a higher amount on your bond, you have spare money to do other things.”

Although interest rates appear to be on a downward cycle, it is still too early to tell exactly what impact this will have.

“It remains a buyers’ market. 2024 has been a tough market for most areas and, in particular, the Gauteng and KwaZulu-Natal markets.”

“This second interest rate cut, however, bodes well for a good 2025 for the whole country as we are coming off a very low base.”

However, Tyson said that homeowners should exercise caution amid several uncertainties.

For instance, there remain questions if the inflation target will be lowered, which could result in higher interest rates.

South Africa unfortunately remains vulnerable to external pressures including the resurgent dollar on the back of Trump’s re-election and rising petrol prices due to ongoing conflict in the Middle East. These, inevitably, have a knock-on effect when it comes to household expenditure.

With this in mind, going into 2025, Tyson said that buyers should carefully consider their choices, taking location relation to travel distances and even facilities that allow them to work from home into account

Homes that have solar power and water collection facilities can also lower utility bills, which will rise in the new year.

“Tragically, too many people buy expensive houses when rates are low and are forced to sell their properties and lose money when the rates increase. Buying a property must be a medium to long-term commitment given the costs associated with entering and leaving the market.”

Read: Electricity panic in South Africa – how to update your prepaid meter before it’s too late